Government unlikely to hit P10-billion privatization target by end-June

MANILA, Philippines – The government is unlikely to meet its target to raise at least P10 billion from the privatization of state-owned assets by the end of June given new setbacks it is facing in its bid to sell its stake in PNOC-Exploration Corp.

Banking sources said the government needs the approval of the new board of PNOC-EC, before it can proceed with the sale. PNOC-EC is the exploration arm of state-owned Philippine National Oil Co.

“There is very little space that it can happen by end-June,” said a source, adding that the government would have to wait for the new administration to appoint a new PNOC-EC board before it can proceed with the sale.

Last March, the Department of Finance presented to the board of PNOC-EC its plan to sell its stake in the company.

The government needs the approval of the board because it has changed the privatization mode for PNOC-EC to an asset-sale mode instead of the original plan of selling 60 percent of its 10-percent stake in the exploration firm.

However, Finance officials said the asset-sale mode is deemed as a faster way to privatize PNOC-EC and is expected to raise more than P14 billion, the amount estimated from the original privatization plan of selling the government’s 60 percent stake.

“The vehicle that we’re using is the sale of assets. The sale of asset would have to be undertaken first. It would take a shorter time and the value could be larger,” Finance Secretary Margarito Teves said last March when he announced the government’s plan.

Despite the shift in the mode of privatization, the two other companies in the Malampaya consortium – lead operator Shell Philippines Exploration B.V. (Spex) and Chevron Malampaya LLC — still hold the “right of first refusal” as stipulated in the service agreement covering the Malampaya project.

As such, Spex and Chevron are expected to exercise their right of first refusal over the assets.

PNOC-EC, Spex and Chevron are partners in the exploration and development of the government’s Service Contract 38 area, now known as the Malampaya deep water gas-to-power project.

Banking sources said if the new PNOC-EC board does not agree to a negotiated sale, the government would have to do it through a public bidding. This, sources said, would take a longer time and may not even be concluded by the end of the year.

Sources added the government may raise as much as P17 billion from the sale of the assets of PNOC-EC. –Iris C. Gonzales (The Philippine Star)